The Rise of Ground-Up Construction Investments in Texas: A Lucrative Opportunity for Real Estate Investors

Texas has long been a magnet for real estate investors, thanks to its pro-business environment, rapid population growth, and affordable land prices. While fix-and-flip and multifamily investments remain popular, a new wave of investors is turning to ground-up construction as demand for housing and commercial space continues to surge. Single-family residential developments and build-to-rent (BTR) communities are leading the charge, as home affordability challenges and shifting rental preferences create unprecedented opportunities for investors willing to break ground.

This article explores the growing popularity of ground-up construction investments in Texas, covering market trends, asset classes, top investment locations, and emerging markets that investors should be watching closely.

The Ground-Up Construction Boom in Texas

Texas is the second-fastest-growing state in the U.S., with an annual population increase of 1.6% in 2024, according to the U.S. Census Bureau. The state’s population now exceeds 30 million, fueled by a steady influx of residents from high-cost states like California and New York. This rapid expansion has intensified the demand for housing, leading to increased ground-up construction projects across all major asset classes.

Market Trends Driving Ground-Up Construction

• Texas issued over 230,000 new residential building permits in 2024, a 10.3% year-over-year increase (Texas A&M Real Estate Research Center).
• Build-to-rent (BTR) community permits surged by 57% in the past two years, as institutional and private investors capitalize on the rising demand for single-family rentals (John Burns Real Estate Consulting).
• Multifamily permits increased by 12.7%, reflecting continued interest in apartment construction despite high interest rates.
• Industrial and warehouse construction grew by 8.9%, driven by e-commerce expansion and supply chain investments (CBRE).

Why Investors Are Shifting to Ground-Up Construction

While investing in existing properties remains profitable, ground-up construction presents unique advantages for investors looking to maximize returns, customize assets, and avoid bidding wars.

• Higher Profit Margins: By developing rather than buying existing properties, investors eliminate high acquisition costs and increase equity from day one.
• Customization & Control: Investors can design projects to meet market demand, ensuring higher rental rates and stronger resale potential.
• Tax Incentives & Low Regulatory Barriers: Texas has no state income tax, and cities like Houston and Dallas offer property tax abatements, opportunity zones, and fast-track permitting for developers.
• Faster Appreciation & Strong Cash Flow: Newer properties command higher rents, lower maintenance costs, and reduced vacancy risks.

Single-Family Residential Developments: Texas’ Strongest Growth Segment

The Demand for New Housing in Texas

As homeownership becomes less affordable, demand for new single-family homes continues to skyrocket. With median home prices in Texas at $293,000 (well below the national median of $417,000), developers are seizing the opportunity to build affordable homes in high-growth suburban areas.

Key Statistics for Single-Family Construction in Texas:

• Dallas-Fort Worth led the nation in new home starts, with over 50,000 single-family permits issued in 2024 (NAHB).
• Houston ranked #2 nationally in homebuilding activity, adding 45,000 new single-family homes last year.
• Austin’s housing supply expanded by 11.2% YoY, but demand still outpaces supply, pushing home values higher (Zillow).
• San Antonio’s new home construction grew by 8.5%, driven by affordable land prices and population growth exceeding 2% annually.

The Build-to-Rent (BTR) Boom: A Game-Changer for Texas Investors

Why Build-to-Rent Is the Future of Housing in Texas

The build-to-rent (BTR) model has become one of the most profitable real estate investment strategies, as more Americans shift toward long-term renting over homeownership. With rising mortgage rates and affordability challenges, demand for professionally managed single-family rental communities is at an all-time high.

According to John Burns Real Estate Consulting, Texas is one of the top five states for BTR investment, with demand driven by young professionals, families, and remote workers seeking suburban affordability without the burden of homeownership.

BTR Market Trends & Growth

• 50% increase in BTR housing permits in Texas over the past two years.
• BTR occupancy rates in major metros exceed 95%, with average rent increases of 8.1% annually (RentCafe).
• Institutional investors are pouring capital into BTR communities, with companies like Invitation Homes and Tricon Residential expanding operations in Texas.
• Suburban BTR projects in Dallas, Austin, and Houston are achieving rental yields above 7%, outperforming traditional multifamily developments.

Top Geographic Locations for Ground-Up Construction Investments

1. Dallas-Fort Worth (DFW) – The Epicenter of New Development

Dallas-Fort Worth (DFW) continues to be the fastest-growing metro in the United States, making it the top market for ground-up construction. With an ever-expanding population and a booming economy, the region has become a national leader in housing demand, corporate relocations, and infrastructure development.

Market Growth & Population Boom

DFW’s population grew by over 132,000 residents in 2024, according to the U.S. Census Bureau, marking its 12th consecutive year as one of the fastest-growing metros in the country. The influx of new residents—driven by job opportunities, business-friendly policies, and affordability compared to coastal markets—has placed significant pressure on the existing housing supply, creating prime conditions for new construction projects.

In 2024 alone, single-family home construction permits surged by 13.5% year-over-year (YoY), as developers scramble to meet housing demand (Texas A&M Real Estate Center). New home starts have been particularly concentrated in high-growth suburban areas like Frisco, McKinney, and Fort Worth, where land availability, strong school districts, and access to job hubs make them prime locations for families and young professionals.

Build-to-Rent (BTR) Expansion in DFW

DFW is also emerging as one of the strongest build-to-rent (BTR) markets in the country. The region’s rapid home price appreciation (9.3% YoY, Zillow) and rising mortgage rates have pushed more families and professionals into long-term rentals.

Investors and institutional developers are capitalizing on this trend by constructing entire communities of rental homes, particularly in Prosper, Little Elm, and Celina, where land prices remain relatively affordable compared to Dallas proper.

• BTR occupancy rates in DFW exceed 96%, signaling an undersupplied market (John Burns Real Estate Consulting).
• Average rent growth for single-family rentals in the metro area is 7.8% YoY, significantly outpacing inflation.
• New BTR communities in Frisco and Denton have seen lease-ups complete within 60 days of project completion, highlighting demand resilience.

Infrastructure & Commercial Development

Beyond residential growth, DFW continues to expand its commercial and industrial sectors, fueling further real estate investment opportunities. Major infrastructure projects, including the $3 billion expansion of Dallas-Fort Worth International Airport and the North Texas Tollway extension, are enhancing connectivity and boosting demand for warehouse, industrial, and mixed-use developments.

• Over 30 million square feet of industrial space is currently under development, making DFW a logistics powerhouse (CBRE Texas Industrial Report).
• Corporate relocations from companies like Caterpillar, Wells Fargo, and Goldman Sachs are adding thousands of high-paying jobs, further strengthening demand for housing.

With a thriving job market, strong rental demand, and continued infrastructure investment, DFW remains the top market in Texas for ground-up construction investors.

2. Houston – A Powerhouse for Residential & Industrial Growth

Houston has long been recognized as one of Texas’ most dynamic real estate markets, thanks to its strong job growth, affordability, and diverse economy. The city’s rapid expansion has made it an attractive location for both residential and commercial ground-up construction projects.

Population Growth & Housing Demand

Houston’s population increased by 82,000 residents in 2024, making it the second-fastest-growing metro in Texas (U.S. Census Bureau). With low housing costs relative to income levels, no state income tax, and a thriving job market, the city continues to attract transplants from high-cost states.

• Median home prices in Houston remain significantly lower than other major Texas metros, sitting at $325,000 compared to Austin’s $482,000 (Zillow Home Value Index).
• Single-family home construction grew by 11.7% YoY, particularly in high-demand suburbs like Katy, The Woodlands, and Cypress, where families seek top-rated schools and master-planned communities.
• New construction homes in Houston’s suburbs can still be built for under $400,000, a price point that remains highly desirable in today’s market.

Build-to-Rent (BTR) Communities in Houston

The BTR sector in Houston is experiencing explosive growth, as affordability challenges and rising mortgage rates drive long-term rental demand.

• Houston’s BTR rental demand has exceeded supply by 2:1, meaning two prospective renters exist for every available unit (Yardi Matrix).
• BTR lease-ups in The Woodlands and Cypress have reached 98% occupancy within three months of project completion, signaling strong tenant demand.
• Average single-family rental prices increased by 6.9% YoY, with further growth expected as new developments stabilize.

Houston’s BTR communities are particularly attractive to young professionals, families, and retirees looking for affordability and space. Investors focusing on suburban BTR projects near major employment hubs stand to benefit from long-term rental appreciation and stable occupancy rates.

Industrial & Commercial Real Estate Boom

Houston is not just a residential powerhouse—it’s also one of the nation’s largest industrial and logistics hubs, making it an excellent market for investors interested in ground-up warehouse and distribution center construction.

• Over 20 million square feet of industrial space is currently under construction, with demand driven by e-commerce expansion, port activity, and corporate logistics needs (CBRE Market Report 2024).
• The Port of Houston ranks among the busiest in the U.S., generating over $800 billion in trade annually, further fueling demand for industrial and commercial developments.
• Texas Medical Center, the world’s largest medical complex, continues to expand, creating thousands of jobs and boosting nearby real estate demand.

With its affordable land prices, business-friendly policies, and sustained economic expansion, Houston remains one of the most attractive markets in Texas for real estate investors focusing on ground-up construction.

3. Austin – High Demand Meets Housing Shortages

Austin’s continued tech industry expansion has created a severe housing shortage, making it a prime market for new construction.

• Median home prices increased by 9.1% YoY, indicating strong appreciation potential.
• BTR occupancy rates exceed 97%, particularly in Pflugerville, Round Rock, and Georgetown.
• Austin leads Texas in mixed-use development, with downtown projects blending residential, retail, and office spaces.

4. San Antonio – An Affordable Alternative for Ground-Up Development

San Antonio remains an affordable alternative to Austin, with lower land costs and increasing rental demand.

• San Antonio’s population grew by 2.2% in 2024, surpassing national growth rates.
• New home construction increased by 8.5%, particularly in Stone Oak, Alamo Ranch, and New Braunfels.
• BTR communities in Schertz and Converse are achieving rental yields above 8%, making them prime investment targets.

Emerging Market to Watch: Lubbock – A Hidden Gem for Ground-Up Construction

While Texas’ major metros—Dallas, Houston, Austin, and San Antonio—often dominate real estate investment discussions, savvy investors are turning their attention to secondary and tertiary markets where property values remain affordable and rental demand is steadily increasing. One of the most promising emerging markets in Texas for ground-up construction is Lubbock.

Why Lubbock? A Market Poised for Growth

Lubbock, home to Texas Tech University, is a fast-growing city with strong demand for new housing, rental properties, and commercial real estate. The city’s population has increased by 8.5% over the past decade, reaching approximately 267,000 residents in 2024, according to the U.S. Census Bureau. This growth has fueled a need for new residential and commercial developments, making it an attractive location for real estate investors looking to capitalize on lower land costs and high rental yields.

Unlike Texas’ larger cities, where land acquisition costs have skyrocketed, Lubbock still offers affordable entry points for developers and investors. The average price per acre for residential development in Lubbock is $35,000-$60,000, significantly lower than the $200,000+ per acre prices seen in Dallas and Austin suburbs (Texas A&M Real Estate Center).

Single-Family and Build-to-Rent Demand in Lubbock

The demand for single-family home construction and build-to-rent (BTR) communities in Lubbock is surging. With median home prices at $195,000, the city remains significantly more affordable than the Texas average ($293,000), drawing in young professionals, families, and retirees who are priced out of other major metros.

Additionally, rental rates in Lubbock have increased by 6.3% year-over-year, with single-family rentals seeing even stronger growth as home affordability declines (Zillow Home Value Index). BTR communities, which offer the benefits of single-family homes without the responsibility of ownership, are in particularly high demand.

• Lubbock’s BTR communities are experiencing 95%+ occupancy rates, indicating an extremely tight rental market.
• Multifamily rental demand has also surged, with the average apartment occupancy rate at 97%, compared to the national average of 92% (RentCafe).
• The University District and Milwaukee Corridor are prime locations for student housing and workforce rental developments, attracting both individual and institutional investors.

Texas Tech University’s Influence on Real Estate Development

One of the biggest drivers of real estate demand in Lubbock is Texas Tech University (TTU), which has an enrollment exceeding 40,000 students. The university has been on a steady growth trajectory, with a 12% increase in student population over the past five years.

As the university continues to expand its research and medical programs, demand for student housing and workforce housing near the Texas Tech Health Sciences Center and surrounding areas is rising. Many students and faculty prefer to rent rather than buy, creating a consistent need for new rental properties and BTR developments.

Commercial & Industrial Growth – A Rising Employment Hub

Beyond residential development, Lubbock’s commercial and industrial sectors are also experiencing rapid growth. The city is emerging as a regional logistics and distribution hub, thanks to its central location in West Texas and expanding infrastructure.

• Industrial real estate in Lubbock has grown by 9.2% YoY, fueled by expansions in logistics, e-commerce warehousing, and manufacturing (CBRE Texas Industrial Outlook).
• Retail construction permits have increased by 7.5% in 2024, as new businesses and national retailers expand into Lubbock’s growing suburban communities.
• The Lubbock Economic Development Alliance (LEDA) has offered over $20 million in business incentives over the past two years to attract companies that boost job growth and drive real estate demand.

Neighborhoods & Submarkets to Watch in Lubbock

1. Milwaukee Corridor – One of Lubbock’s fastest-growing areas, ideal for build-to-rent and single-family development.
2. South Overton – A hotspot for student housing developments near Texas Tech.
3. Wolfforth – A high-growth suburb where land prices are still affordable, making it an attractive ground-up construction location.
4. Northwest Lubbock – A promising industrial and logistics development hub, set to benefit from the city’s expanding infrastructure investments.

Why Investors Should Pay Attention to Lubbock

With affordable land, increasing rental demand, and strong economic growth, Lubbock represents a high-potential but under-the-radar market for ground-up construction investments. Whether focusing on single-family developments, build-to-rent communities, student housing, or industrial real estate, Lubbock’s population and job growth trends support long-term real estate appreciation and cash flow opportunities.

For investors looking to capitalize on a market before it reaches mainstream attention, Lubbock offers high returns, lower barriers to entry, and strong economic fundamentals.

Conclusion

Texas remains one of the most attractive real estate markets in the U.S., and ground-up construction is becoming a preferred strategy for investors looking to maximize returns. With strong demand for single-family residential developments and build-to-rent communities, investors have the opportunity to build wealth in high-growth metros like Dallas, Houston, Austin, and San Antonio, as well as emerging markets like Lubbock.

Looking for financing to break ground on your next project? At American Heritage Lending, we offer ground-up construction loans tailored to real estate investors. Pre-qualify today to get started.